It true that there are several small-scale businesses that do not need to be insured. Maybe the amount invested is too low, or the customer can have no possible reason to sue the company they bought the item or the service from.
Having said that, if you are running a home-based business that involves selling tangible items like toys, clothing, food, ornaments, medical supplies, etc. you do need to get the right insurance.
A survey was performed by a Texas-based finance firm named Next Insurance to learn more about the businesses in the US. They concluded that 44 percent of businesses running in the country had never had any kind of insurance ever. Further, these uninsured businesses were operational for more than a year.
The survey also revealed that the insured offered to small-scale home-based business fails to meet their unique requirements. Hence, 44 percent of companies are being forced to run without the security of a safety net.
What Type of Insurance Policies Are Available for a Home-Based Business?
According to a report by the Insurance Information Institute, three types of insurances are deemed useful for a small-scale home-based business. I have listed them below.
1) Liability Insurance
Your homeowners or rental property insurance may or may not cover you in case of damages to your work-related items. Also, if a client visits your home office and gets injured (slips on the floor, get bit by a dog in the premise, etc), your home insurance policy company might disqualify your claims for coverage as home insurance does not cover business expenses. Hence, you need to purchase liability insurance for your home business.
2) Business Vehicle Insurance
Do you own a food truck? Or run a mailing service? If you are currently using a personal vehicle to run business errands, your general auto insurance will not cover for the damages (if occurred in an unfortunate incident). Claiming insurance coverage from your general insurance company when you are using the vehicle for business purposes can also be deemed as a fraud–it can land you in legal troubles. To get started, you need to fill up the Business Auto Coverage Form (BACF) provided by your state.
3) Workers Compensation Insurance
If you are running a small-scale construction company with a few employees working for you, you might need to purchase “Workers Compensation Insurance”. Your employees might also ask you for this coverage before they join the organization. This is why you need Workers Compensation Insurance: if an unexpected event was to occur and as a result, one or more employees get physically injured, your insurance company will take care of their medical bills and monthly salary (until they get well or a set limit). Your company won’t have to incur any financial losses.
Depending on what kind of a home business you run, the insurance policy might cost you anywhere between $400-$3000 per year. The premium goes up with the number of employees and the health/financial risks involved in running the business. To find out the accurate insurance expense for your home business, talk to a financial advisor or an insurance agent.